Report: Health Care Spending Growth Expected To Rise in 2014
The report noted that the stable, yet minimal, growth in health spending in recent years likely will end in 2014 for several reasons, such as coverage expansions under the Affordable Care Act. According to the report, an estimated nine million U.S. residents will have gained health coverage this year via private insurers and Medicaid (Pear, New York Times, 9/3). Meanwhile, more baby boomers will be joining Medicare (Viebeck, The Hill, 9/3).
Specifically, the report predicted that total health spending will increase by 5.6% in 2014. Spending would then increase by an average of about 6% annually until 2023, when health care costs will comprise around 19.3% of the country's total spending. By 2023, the report estimated that the U.S. will spend $5.2 trillion on health care, up from $2.9 trillion in 2013.
In addition, the federal government will be paying for a larger share of total health care costs while state and local governments' shares will remain stable. The report predicted that federal spending on Medicaid will increase by 27%, from $254 billion in 2013 to $323 billion in 2015. During that same time period, state spending on Medicaid is expected to increase by 12% to $218 billion, up from $195 billion. Meanwhile, private businesses and households will pay a slightly smaller share.
The report also estimated that spending on prescription drugs will increase more rapidly, growing by 6.8% in 2014 and 6.4% in 2015 (New York Times, 9/3). It pointed to newly insured individuals gaining more generous coverage and an increase in the use of specialty drugs as the primary drivers behind the growth (Armour, Wall Street Journal, 9/3).
CMS economist Andrea Sisko said spending increases will be "commensurate with projected economic growth" (The Hill, 9/3).
Health Care Spending Still Slower Than Previous Growth
However, the average annual growth rate in health spending through 2023 is expected to be lower than it had been in the two decades leading up to 2007, when an economic recession hit the country (New York Times, 9/3). From 1990 to 2008, health care spending averaged an annual increase of 7.2%, CMS said. The estimates for 2013 to 2023 are also 0.1% below the 5.8% in average health spending growth from 2012 to 2022 that CMS had projected last year (Lawder, Reuters, 9/3).
In addition, limited growth in Medicare reimbursements under the ACA and a trend toward higher deductible health plans could help curb the nation's health spending. Further, an excise tax placed on costly employer-sponsored health plans that is scheduled to take effect in 2018 "is expected to slightly constrain premium growth," according to the report (New York Times, 9/3).
Sean Keehan, one of the report's authors, also said that an increase in the use of generic prescription drugs, more scrutiny on providers' prices and trends toward health plans that require more out-of-pocket costs will help to rein in government spending (Levey, "Nation Now," Los Angeles Times, 9/3.) However, Keehan added that CMS does not "have any explicit impact for any of these innovations at the current time," since there is "just not enough evidence" on their effects (Evans, Modern Healthcare, 9/3).
Other experts said that changes in care delivery, such as insurers awarding providers for delivering better quality care, will also help to control costs.
Cost-Controlling Work Is Not Finished
Despite the lower spending projections, Kaiser Family Foundation's Larry Levitt said lawmakers should not stop working on other measures to control health spending. He said, "The fact that health spending is expected to grow slowly doesn't help someone whose paycheck is growing even more slowly," adding, "Now is not the time to take the foot off the brake" ("Nation Now," Los Angeles Times, 9/3).
In addition, the report assumes that Congress will approve another so-called "doc fix" that will negate scheduled payment cuts under Medicare's sustainable growth rate formula (Millman, "Wonkblog," Washington Post, 9/3).
Medicare Spending Falling
Meanwhile, an update to budget forecasts released by the Congressional Budget Office showed that per capita Medicare spending has not only grown at lower rates than expected, but actually is declining, the New York Times' "The Upshot" reports.
According to the update, the U.S. will spend about $11,200 on average for each Medicare beneficiary this year, compared with $12,000 on average per beneficiary in 2011. Further, CBO projects that cost to fall below $11,000 by 2017 and stay below the 2014 mark until 2020 (Sanger-Katz, "The Upshot," New York Times, 9/3).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.